JP Morgan intends to patent blockchain-based P2P payment solution

American multinational investment bank and financial services giant JP Morgan Chase & Co. wants to patent a blockchain-powered technology solution that will make peer-to-peer (P2P) payment network for banks a reality. The patent application was filed in October 2017, and the US Patent and Trademark Office (USPTO) has made it public recently.

Cross-border payments now use a process where a number of messages must be sent between the bank and the clearing houses involved. There are intermediaries in the payment process flow.

The process involves a significant cost, in addition to delays and restricted availability to the funds. Real-time settlements aren’t possible, and with the involvement of counter parties, there are risks involved in the settlement process.

JP Morgan intends to resolve this with the power of blockchain. Blockchain ensures decentralization by design, where ‘nodes’, i.e. computers on the network, maintain a shared version of truth. Every node has the entire information present on the blockchain, and there’s no central server controlling the flow of information. The ledger of all transaction is present in every node, hence the technology is also called ‘distributed ledger technology’ (DLT).

Blockchain also uses a rigorous consensus mechanism to validate transactions, which makes hacking blockchain economically non-viable. Cryptography used in blockchain, and strong encryption required to be used by the nodes provide additional layer of securities. All of these security measures make blockchain eminently suitable for use in the highly regulated financial services sector.

JP Morgan envisages the following blockchain-powered solution:

The payment originator will initiate a payment instruction to a payment beneficiary;

The payment originator bank will post and commit the payment instruction to a DLT;

The payment beneficiary bank will also post and commit the payment instruction to the same DLT;

The payment originator bank will validate and process the payment through their internal system, debiting the account of the payment originator.

The above process will ensure that one consolidated posting across multiple financial institutions, instead of multiple back-and-forth messages.

While JP Morgan, headquartered in New York, USA, awaits the grant of the patent, it’s important to note that blockchain is being increasingly seen as important for cross-border payments. Financial messaging provider SWIFT has conducted a blockchain proof of concept (PoC) engaging 34 global banks, to explore the value of this technology in cross-border payments.

JP Morgan‘s latest move conforms with the trend of the banks and financial service institutions increasingly expanding their footprint in the blockchain technology space, for e.g.:

Royal Bank of Canadaintends to make credit score calculation transparent with the help of blockchain;

Bank of America is seeking a patent for a blockchain-based data storage solution;

Amex has filed a patent for a technology solution to expedite payment transactions using blockchain.

Anujit has over two decades of IT industry experience, spanning software development, project management and consulting areas, and has added significant value to the businesses of clients he has supported. Outside of working hours, Anujit is passionate about history and sports.

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